Philippine banks’ assets soar to all-time high

By Katherine K. Chan, Reporter

THE PHILIPPINE BANKING industry’s assets jumped to an all-time high as of end-May amid stable deposit inflows, continued financing for households and businesses, and higher investment holdings, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Assets held by domestic banks reached a fresh high of P30.442 trillion at end-May, climbing by 11.69% from P27.257 trillion in the same period last year.

This exceeded the previous record of P30.336 trillion in total assets logged at the end of March.

Month on month, the sector’s assets edged up by 1.07% from P30.12 trillion posted at end-April.

Union Bank of the Philippines (UnionBank) Chief Economist Ruben Carlo O. Asuncion said recovering economic conditions and steady demand allowed domestic banks to expand their balance sheets during the period.

“The record-high level of bank assets as of end-May reflects the continued expansion of economic activity and financial intermediation in the country,” Mr. Asuncion said in a Viber message.

“Sustained loan growth, steady deposit inflows, and the buildup of investment holdings have supported balance sheet expansion, underpinned by resilient domestic demand and improving financing conditions,” he added.

Banks’ assets are mainly supported by deposits, loans, and investments. These include cash and due from banks as well as interbank loans receivable (IBL) and reverse repurchase (RRP) net of allowances for credit losses.

As of end-May, the banking sector’s total net loan portfolio inclusive of IBL and RRP increased by 12.07% year on year to P16.946 trillion from P15.121 trillion.

Net investments, or financial assets and equity investments in subsidiaries, stood at P8.641 trillion, up 8.61% from P7.956 trillion logged a year prior.

Banks’ net real and other properties acquired also rose by an annual 18.79% to P143.804 billion from P121.061 billion.

Meanwhile, the industry’s other assets jumped by 20.11% to P2.497 trillion at end-May from P2.079 trillion in the previous year.

Central bank data also showed that cash and due from banks grew by 11.83% to P2.215 trillion at end-May from P1.98 trillion in the comparable year-ago period.

Universal and commercial banks continued to hold most of the sector’s assets, with P28.384 trillion at end-May.

This was followed by thrift banks, which had P1.404 trillion in assets, and digital banks with a total of P195.593 billion.

Based on the latest data available on the central bank’s website, rural and cooperative banks in the country had combined assets of P458.013 billion at end-March.

On the other hand, Philippine banks’ total liabilities reached P26.854 trillion as of the end of May, rising by 12.89% from P23.787 trillion last year.

Of this amount, around 83% were deposits, which climbed by 11.19% year on year to P22.306 trillion from P20.061 trillion previously.

Peso-denominated deposits totaled P18.395 trillion, while foreign currency deposits stood at P3.911 trillion.

UnionBank’s Mr. Asuncion said banks’ assets are likely to continue growing as monetary conditions ease, supported by ample liquidity in the financial system and steady loan demand.

However, renewed financial market volatility triggered by the re-escalation of the conflict involving the US, Israel and Iran could weigh on the banking industry’s asset growth.

“A prolonged escalation could exert pressure on global oil prices, potentially fueling inflation, affecting consumer spending and business activity, and introducing greater uncertainty into financial markets,” Mr. Asuncion said. “These developments could temper credit demand and lead banks to adopt a more cautious lending stance if risks become more pronounced.”

The impact of global geopolitical risks on local inflation, interest rates, and market sentiment will likely shape banks’ balance sheets in the coming months, he added.

“For now, domestic economic fundamentals remain supportive of balance sheet growth,” Mr. Asuncion noted.

The central bank earlier said that geopolitical shocks from the ongoing Middle East war have minimal direct impact on the local banking system.

However, the BSP also flagged potential asset quality risks in certain sectors from weaker domestic and external financial conditions.